Construction firms with debt losing out on top jobs

Clients in the construction sector are avoiding giving work to firms with significant debt, according to Leadbitter chairman and chief executive Bob Rendell.

Rendell said this reluctance had led to Leadbitter’s management walking away from a private-equity backed management buyout and towards a deal with a larger contractor.

Rendell said the management had come close to securing such a deal before Dutch parent company Heijmans sold the firm to French construction giant Bouygues. The sale was announced last month.

Bouygues took a majority shareholding but the Leadbitter management still holds a 49% stake.He said that the deal was made more appealing because many clients are setting tough financial hurdles for contractors at the pre-qualification questionnaire (PQQ) stage, locking out those with weak balance sheets.

“We had a look at a potential management buy-out, went to a venture capital firm and got good feedback. But clients are nervous about balance sheet strength and, in PQQs, are setting tough financial ratios that need to be met,” Rendell said.

He added: “We have a committed majority shareholder and can benefit from the backing this gives us.

“We now have access to good banking terms as well as parent company guarantees and can also benefit from Bouygues’ experience in project investment and finance, which should lead to future contract success.”